CPM Cheat Sheet 2026

The 30 highest-yield CPM facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. Which of the following fee structures is most commonly associated with hedge funds? → 2% annual management fee and 20% performance fee above a hurdle rate
2. Which international standard ensures the consistency of performance reporting for investment managers? → GIPS
3. A bond with a higher coupon rate, all else equal, will have: → Lower duration because more of its value is returned sooner via coupon payments
4. What does tracking error measure? → Portfolio returns against its benchmark
5. Which of the following is the primary benefit of international diversification? → Reduction of portfolio risk by including assets with low correlation to domestic holdings
6. Commodities are included in a portfolio primarily to provide: → Inflation hedging and diversification, as commodity prices often rise with inflation
7. Why must portfolio managers avoid conflicts of interest? → To protect client interests and preserve objectivity
8. Rebalancing a portfolio to its strategic asset allocation targets serves to: → Maintain the desired risk profile and systematically buy low/sell high
9. What type of risk is diversification most effective at reducing? → Unsystematic risk
10. Which risk measure quantifies the maximum expected loss over a given time period at a specified confidence level? → Value at Risk (VaR)
11. Which alternative investment strategy profits from pricing discrepancies between related securities? → Relative value / arbitrage
12. To reduce a portfolio's beta from 1.2 to 0.8 using equity index futures, the portfolio manager should: → Sell equity index futures
13. Which performance measure isolates a manager’s skill at generating returns independent of market movements? → Alpha
14. 'Delta hedging' in options portfolio management refers to: → Maintaining a position in the underlying asset sized to offset an option's delta exposure
15. What does an inverted yield curve typically signal? → A recession is likely, as short-term rates exceed long-term rates
16. Why is benchmarking important in portfolio performance measurement? → To compare performance against a market standard
17. Which portfolio construction technique allocates assets based on risk contribution rather than dollar value? → Risk parity
18. The delta of a standard European call option is always bounded between: → 0 and 1
19. Tactical asset allocation (TAA) differs from strategic asset allocation in that it: → Makes short-term adjustments to exploit perceived market opportunities
20. The vintage year in private equity refers to: → The year the private equity fund made its first investment or began deploying capital
21. An equity portfolio manager with a concentrated portfolio of 20 stocks primarily faces which type of risk compared to a diversified 200-stock portfolio? → Higher idiosyncratic (stock-specific) risk
22. What does the Sharpe Ratio measure in portfolio performance? → Excess return per unit of total risk
23. Systematic risk in a portfolio is best measured by: → Beta
24. A call option is considered 'in-the-money' when: → The underlying asset's price exceeds the strike price
25. Scenario analysis in risk management is primarily used to: → Evaluate portfolio performance under specific hypothetical or historical events
26. Why is setting clear investment objectives important in policy development? → To guide portfolio construction and management
27. Which section of an IPS details how often portfolio performance should be reviewed? → Monitoring and review policy
28. What is a key benefit of rebalancing a portfolio periodically? → Maintain desired asset allocation and manage risk
29. Which metric combines both return and risk into a single measure by dividing excess return by the portfolio's standard deviation? → Sharpe ratio
30. Why is risk-adjusted performance measurement preferred over absolute returns? → To factor in the risk taken to earn returns